The News' Contractor Consultants were asked to identify the biggest challenge that they will face this year. The answers showed that everything still isn't rosy for the HVACR trade.

And it should come as no surprise that finding and keeping qualified labor is still at the top of most lists.

The Labor Problem

"I would say the biggest challenge in 2004 is managing our workforce," said Scott Getzschman of Getzschman Heating & Sheet Metal/Service Experts (Fremont, Neb.). "As a company, we will be rolling out many programs that will enhance productivity and profitability. This means change; and for many employees, change frustrates them.

"The challenge is always to roll out the programs and ensure that, as managers, we make sure the programs are implemented properly and all employees buy into the changes. If we can successfully roll out these programs without losing any productivity, we will have a very successful year and everybody will have fun."

"Our biggest challenge is labor efficiency and cost," said Jeff Somers of Monsen Engineering Co. (Fairfield, N.J.). "This is the largest expense we have delivering our product to the market place. We have always performed detailed analysis on the cost of one hour of labor, in addition to increased benefits and expenses such as cell phones, global positioning systems, and high-tech tools, to name a few.

"Our burdened rate of labor has risen significantly over the past two years due to several reasons and we must still remain competitive in the marketplace. We are looking at and making changes to items that affect our costs. Some of them that I recently negotiated are cell phones. I would recommend that this be reviewed every six months because providers have rate-change plans that you can take advantage of.

"We also contracted with Exxon/Mobil for fuel and get 3.5 percent back on the purchase. There are many items that make up the burdened cost of labor and, as a union contractor, we can only look at the efficiency of our field labor and all the other controllable costs."

"I don't think the issue of growing your company's sales volume will be the issue as much as getting the properly trained employees to service the business," said Larry Taylor of Air Rite Air Conditioning Co. (Fort Worth, Texas). "Some of the largest challenges we will face are the continuing manpower problems. Even with increased benefits, training, pay, and incentive programs, we are still not attracting new folks into the HVACR trade.

"We, as individuals, must focus harder on working with our local associations, trade schools, high school votech programs, etc., to overcome this issue. I know the industry organizations are working on this problem also, but they cannot do it alone."

Taylor did not necessarily agree that contractors must become all-consumed in the customer service issue at a cost to employees and their families.

"It will continue to become harder for us to balance the customers' wants and needs, the employees' wants and needs, the changing demographics, the changing cultures, the company's wants and needs, and will require us, as managers, to be more creative and understanding of all of these issues," expressed Taylor. "I believe we will see it approaching more to the point of companies turning down business in order to keep employees."

Arthur Pickett of Royal Air Systems Inc. (North Reading, Mass.) cited the age-old problem facing contractors: lack of qualified technicians.

"What to do about it?" he asked, before answering his own question. "First, we look at and interview anyone available from the public trade schools. This is usually a disappointment. The parents in New England think it's terrible to have to tell their friends and relatives their child is attending a vocational school.

"The attitude is to make the kids stay in high school even if they are taking basic courses. The end result is the kid graduates with no skill or knowledge and no possibility of getting into a college, thus coming out of high school with two choices: Burger King or McDonald's.

"We sometimes hear about the kids from existing employees and will interview them. If they can talk to you and look at you while doing so, that's a plus if you can read their writing. That's the second plus. And, if they show up for the interview on time in reasonable clothing, that's the third plus. We will usually hire them as an entry-level helper.

"After a couple of months, if the kid shows promise and the lead man thinks he does, too, we should start training both with night classes in-house and night classes at some of the supply houses. After a year, if he's coming along, we will invest heavily in him.

"We will sign an agreement that we will spend money to get him up and running and if he leaves before we get three years out of him, the bill is prorated and he pays us. We will usually send one or two guys out to Trane or Lennox factory schools for a week and pay all the expenses.

"The private trade schools sometimes offer the best prospects. Because they spent several thousand dollars to attend, you know they are serious about wanting to learn.

"The other source sometimes is the small shops around us - maybe a guy working out of his house with one or two installers and one service man. After a while, they want benefits and he can't afford it so we become attractive."

Ann Kahn of Kahn Mechanical (Dallas) echoed Pickett's comments.

"Without a doubt, the biggest challenge facing my business in 2004 is finding qualified technicians," she said. "We are blessed with a very knowledgeable, talented sales group, and the out-of-the-ordinary design/build project or service customer is our specialty. It wouldn't be stretching the truth to say that Kahn Mechanical has grown and thrived on this type of work.

"However, it's not easy to find technicians capable of handling these jobs in the workmanlike, professional manner we demand. To alleviate this situation, starting this year, continuing education of every employee is our focus. Every employee is encouraged to take at least 32 hours of job-related classes, and career advancement will be awarded to those who participate in the program."

And Still More Labor-Related Issues

"We have changed our recruiting message and now focus on hiring intelligent people with good attitudes, rather than people with specific qualifications. Knowledge we can train. The rest is either there or it isn't. The bottom line is that we have had to become a training company.

"We have set a standard of 40 hours per employee per year as a minimum training standard to maintain their standing within the company. We built a training center last year with a series of hookups for gas, electric, and data so that we can set up any type of equipment. With our numbers, we are able to bring trainers in on a very cost-effective basis and have them customize training programs to our specific needs. We are a member of a co-operative and work with them, as well as with manufacturers, distributors, associations, and various agencies to co-produce training programs.

"It's a lot of work, but the result is that we have been able to stay ahead of our manpower requirements to continue to deliver the quality service in every instance that our customers have come to expect from us. It has been a big investment, but the payoff is worth it."

At Comprehensive Energy Services Inc. (Altamonte Springs, Fla.), Todd Morgan said his company's biggest challenge for 2004 is "improving our field construction labor productivity.

"Since the start of the down economy in 2001, we have continued to successfully grow our revenues in our design-build-maintain business. We have been very successful at hiring good people during the last two years to support our growth.

"We have not been successful at controlling our construction labor costs at a time when competition is high and margins are low. The result has been increased revenues with a shrinking bottom line. We know that we have significant room for improvement in our construction field labor productivity. By focusing our efforts on this challenge, we can significantly enhance our bottom line and provide better value to our customers.

"We have identified our challenge, set our 2004 goals for improvement, and had our first brainstorming session with our foremen, project managers, and construction manager. Some of the initiatives we developed to address this challenge include an improved labor-savings incentive plan, increased training for foremen and trade workers, improved labor cost control reporting, and early detection of problems."

Mary Marble of J.A. Marble Co. Inc. (Dearborn, Mich.) is also looking at labor costs.

"Our biggest challenge is to maintain gross margins," she said. "In our service division, we will watch every invoice and each hour of labor. Sales are down by 7 percent and the market is tough.

"We will analyze all costs, [yet] we will continue with our direct marketing and have our salesperson making cold calls two days a week, as well as calling on current customers.

"We are also watching our labor hours in our construction division. We have broken down each section - sometimes as far down as a pipe run in a classroom - per each bid and have reviewed costs with the job foreman to ensure what hours are needed and how many hours we already have into each job."

Meanwhile, Russ Donnici of Mechanical Air Service Inc. (San Jose, Calif.) will continue to focus on "our most important assets, which are our employees."

"Without them and their commitment to providing a high level of service to our clients, we would not be in the position we are in," he said. "We also continue our significant commitment to returning back to the community some of the resources we have been blessed with.

"We believe that if we stay committed to our core values, we will continue to be blessed with success. We also realize that it is a given that we need to pay attention to the business basics of cost control. We need to work hard at controlling costs relating to workers' compensation insurance, liability insurance, and medical costs. Budgeting and focusing on short- and long-term goals, we feel, are also keys to moving forward as a growing and profitable business."

It's Not Always About Labor

"The biggest issue facing my business, and I might add the industry, is having a positive attitude - that it can be done by us," said Aaron York of Aaron York's Quality A/C (Indianapolis). "Every single call that comes into our office is a customer who, No. 1, wants us more than any other contractor available; No. 2, wants us to solve their problems regardless of what it takes; No. 3, wants us implicitly or they would not have called; and, No. 4, has a pressing need and has complete confidence that we, and only we, are the ones to solve it.

"When we see customers - not ‘callers,' in this vein - we will treat them differently and will have more business than we can handle. This will also handle many more of our issues, such as qualified techs because we will have the resources and desire to address those situations.

"It is amazing what our attitudes will do to our business. It is my intent to cause our personnel, starting with management and trickling down, to comprehend this by being the example others want to follow and becoming a Billy Graham-type of preacher who delivers the message in an acceptable manner, offering the opportunity to be a part of success."

Dave Dombrowski of Metro Services/ARS-ServiceMaster (Raleigh, N.C.) said his company's biggest challenge is "inertia" - keeping momentum going and moving away from things the company did in the past.

"We have a great knowledge of the business and a great game plan, but the day-to-day stuff is so overwhelming that it is hard to keep our eyes on the horizon without looking down at your feet, keeping an eye on the speed bumps that we are about to trip over," said Dombrowski. "Our biggest challenge is to have good action plans in place for the short term but to focus on the long haul.

"We may suffer some pains in the short term, but we will be a much better company if we focus on the future and not be a reactionary company."

Meanwhile, Tom Lawson of Advanced Air Conditioning & Heating Inc. (Bossier City, La.) turned right to specifics. "The biggest challenge has been financing residential changeouts," he said. "Most people do not have $5,000 sitting in their checking account and do not have credit on credit cards. Our local banks and utility companies stopped financing in April 2001. The manufacturers are declining about 50 percent of our customers who need financing.

"[But] just last week a local finance company offered us more lenient financing. Hopefully more than 50 percent of our customers will now be approved."

Publication date: 01/26/2004